So on Friday 13th May, we have seen the classic head and shoulder topping pattern confirm here on a lot of major indices. You could apply this thinking also to S&P500 and its derivatives Spy etc.

So the head and shoulder neckline break, all in shorts right? Wrong. Note the orderly bearish action, respecting fibs very tightly on the way down. Also note the formation of a downward channel in the process of forming the head and right shoulder. Also note that next week is options expiry (Opex) on Friday 20th May. This chart tells you all you need to know about what usually happens in these weeks https://northmantrader.files.wordpress.com/2016/05/opex1.png.

So my plan for next week is perhaps initially scalp short, and look for a reversal around the bottom purple channel line. If this plays out well and we see reversal there, you can get long and hold it, perhaps even past opex into week commencing 23rd May. Just keep bringing up your stops to lock in profit, or ride the trend (buy dips) intraday if you prefer.

If all goes according to plan (warning - it usually doesn't :D), we'll hit the upper trendline , and this will coincide with a 61.8 retracement and also a proper retest of the H&S neckline as resistance. If the plan is still in tact at this stage, that could be an excellent place to look for shorts, aiming for the technical target of the H&S , all the way down at 17k on the dow (which also coincides with the big 2000 level on S&P 500 )

Comment:
Well there it is, the weekly target done in a day :) Not sure where to go now, kind of messes up the plan but happy with the profit

Comment:
So, the bottom of the channel damaged but held... just. Might be long opportunities here next week, but given the downtrend, possibly the safer trade is to wait and short from higher if the channel top or neckline is retested and the price is rejected there.

The picture is a bit unclear, because you could also draw the H&S neckline in several ways, or argue there are several different patterns in play here. once argument is we just rejected from the neckline in the closing hours of Friday. I think patience is required to get the right entry at the moment.

Comment:
OK so still working nicely still, at a decision point again. The setup long is we we break the channel up, meaning printed candles close above the line, at least hourly. If we break away hard, don't chase, pick up the retrace, often will come right down to break level again.

Comment:
Still in play here, very nice bullish channel break and retest and continued move upwards. I remain long from the channel retest, I expect we go on to test the recent high on this chart and happy to just keep moving stops up to follow recent lows and see how long the trend carries the trade. Some might prefer to curve fit a moving average to this trend as a trailing stop level.

Related Ideas

hehe yeah maybe, but i've taken the money and want to see a real pullback to think about going long again, maybe even more if the channel breaks at the top it's kind of a bull flag. Still, now time for me to wait for a bit, apart from the odd scalp.